Employment

The final post of last week concerned recent material from my research suggesting socialism is becoming popular among Millennials. I ended with this:

Before moving on to a different topic, I must emphasize these last two posts shouldn’t be construed as some sort of attack on Millennials, Democrats, or socialism. Rather, their purpose was to get an idea of where the country might be heading when “America’s largest generation” start flexing their collective political muscle. And what might be required for “protecting and growing self and wealth” when that happens.

I’m going to add just one more thing before departing this subject. And it’s related to getting that “idea of where the country might be heading.”

Back on November 28, 2017, economist Martin Armstrong discussed China in a post on his company’s website. The creator of the Economic Confidence Model included the following in the piece:

What makes the US economy the biggest? The American consumer and lower taxes than Europe. When you leave more money in the hands of the people, they spend it creating jobs for everyone. Europe is following Marx. They think the government is better equipped to spend other people’s money. That produces corruption, not economic growth.

As long as China keeps its tax rate low and allows the people to spend the benefits of their labour, then it will continue to rise economically and displace those in the West who are blinded by power and pursue this Hunt forever more Taxes. The West has to learn that Marx was just wrong. The strongest economic growth unfolds when people are allowed to spend their own money.

(Editor’s note: Bold added for emphasis)

Again, this post is not an attack on socialism/Marxism. But considering the track record of Marxist states in dealing with “self and wealth,” it only makes sense those serious in “protecting and growing” these things would keep a close eye on the direction the collective political mindset of America’s youth is heading. And act accordingly.

U.S. News & World Report, the global authority in rankings and consumer advice, today unveiled the 2017 Best Places to Live in the United States. The new list ranks the country’s 100 largest metropolitan areas based on affordability, job prospects and quality of life…

(Editor’s note: Bold added for emphasis)

Predictably, the Chicago metro area made the list.

Somewhat surprising is how far down it was:

Chicago, IL#83 in Best Places to Live
6.1 Overall Score
5.9 Quality of Life
6.1 Value

The 2017 Best Places to Live were determined in part by a public survey of thousands of individuals across the U.S. to find out what qualities they consider important in a home town. The methodology also factors in data from the United States Census Bureau, the Federal Bureau of Investigation and the Bureau of Labor Statistics, as well as U.S. News rankings of the Best High Schools and Best Hospitals…

This morning the U.S. Department of Labor handed the Chicago metropolitan area some bad news on the employment front. From a Bureau of Labor Statistics news release this morning entitled “Metropolitan Area Employment And Unemployment- December 2016”:

Of the 51 metropolitan areas with a 2010 Census population of 1 million or more, Boston-Cambridge-Nashua, Mass.-N.H., had the lowest unemployment rate in December, 2.5 percent, followed by Denver-Aurora-Lakewood, Colo., 2.6 percent, and Salt Lake City, Utah, 2.7 percent. Birmingham-Hoover, Ala., and Chicago-Naperville-Elgin, Ill.-Ind.-Wis., had the highest jobless rates among the large areas, 5.4 percent each.

Back on January 16 I published a post on Survival And Prosperity entitled “Illinois ‘Grand Bargain’ Legislation Includes 32 Percent Personal Income Tax Hike.” I started the piece with:

Illinois taxpayers may get hit with a significant income tax hike pretty soon…

Yesterday morning, I learned the potential “hit” could be a “combination of punches” directred at taxpayers, businesses, and employment.

From the Greg Hinz On Politics blog on the website of Crain’s Chicago Business:

There’s still no word on when lawmakers are going to vote on it, but an amended tax-hike plan has been introduced in the state capital.

It’s a doozy, with an even higher income tax, a limited service tax and a sort of minimum tax on business. But the soda pop levy is gone, as are a couple of those corporate loophole closings that business groups didn’t like…

The highlights:

The Individual income tax would go to 4.99 percent from the current 3.75 percent, and the corporate income tax to 7 percent from 5.25 percent. Combined, that would pull in about an additional $5 billion a year.

A new “business opportunity tax” ranging from a fee of $225 to $15,000 a year would be imposed, based on payroll. The intent is to make sure that all companies pay something, whether they are profitable or not. The state’s net on this is an estimated $750 million a year.

However, the research and development tax credit would be made permanent and the manufacturers purchase and graphics arts credits would be combined, as some businesses wanted.

A service tax—extension of the sales tax—would be imposed on certain items including repair and maintenance of personal property, use of amusement services including gyms, landscaping, laundry and dry-cleaning, and storage of personal goods such as cars and property. This would pull in a projected $400 million a year.

The telecom excise tax would be extended to cable and satellite services.

Both Radogno and Cullerton are said to have negotiated and support the above, pending action on the rest of the package…

Hinz does a good job summarizing the proposed expanded revenue grab. At this point, I want to go back to that bit about a new “business opportunity tax.” From the actual legislation for the so-called “Business Opportunity Tax Act”:

Section 1-10. Tax imposed.
(a) Beginning on July 1, 2017, a tax is hereby imposed upon each qualified business for the privilege of doing business in the State.
(b) The tax under subsection (a) shall be imposed in the following amounts:
(1) if the taxpayer’s total Illinois payroll for the taxable year is less than $100,000, then then annual tax is $225;
(2) if the taxpayer’s total Illinois payroll for the taxable year is $100,000 or more but less than $250,000, then the annual tax is $750;
(3) if the taxpayer’s total Illinois payroll for the taxable year is $250,000 or more but less than $500,000, then the annual tax is $3,750;
(4) if the taxpayer’s total Illinois payroll for the taxable year is $500,000 or more but less than $1,500,000, then the annual tax is $7,500; and
(5) if the taxpayer’s total Illinois payroll for the taxable year is $1,500,000 or more, then the annual tax is $15,000…

I can see a number of existing and prospective Illinois business owners having concerns with the proposed “Business Opportunity Tax Act.”

First, Illinois already has poor business reputation. For example, early last year Chief Executive magazine asked 513 CEOs to rank states they are familiar with on the friendliness of their tax and regulatory regime, workforce quality, and living environment. The “Land of Lincoln” came in as the 48th worst state in this annual survey, beaten only by New York and California in that order. The “Business Opportunity Tax Act” has the real potential of increasing the perception that Illinois is business-unfriendly.

Second, if my understanding of the legislation is correct, the larger the payroll an Illinois business has, the more taxes they will pay. Consider the following. If I’m an Illinois business owner with a payroll just shy of $250K who would like to bring on more staff, I may be dissuaded from doing so to avoid forking over an additional $3,000 to the state (unless I’m convinced the hiring would offset the $3K hit). And how might employee raises be impacted once payrolls start approaching a higher tax bracket? The proposed “Business Opportunity Tax Act” may not be too terrific for Illinois employment.

Third, readers of this blog may know that I am in the process of rolling out a research business focusing on specialized asset protection. It’s been my intention to launch in the Chicago area. Lately, however, I’ve been thninking of opening up shop in southeast Wisconsin (where my family has a residence) due to the direction Illinois looks to be heading with taxes and its treatment of the business community. The passage of the “Business Opportunity Tax Act” could be the straw that breaks the camel’s back. I wonder how many other prospective Illinois business owners might be in the same boat?

Twenty years after a Republican governor of Wisconsin spearheaded an ambitious welfare reform package, the current governor is trying to build momentum for a new round of reforms.

Wisconsin Gov. Scott Walker (R) on Monday said he would ask the state’s Republican-led legislature to undertake one of the most aggressive welfare reform packages since a wave of new measures passed in the mid-1990s.

Walker’s plan, “Wisconsin Works for Everyone,” would impose new work requirements on both able-bodied adults with school-age children who receive state food assistance and those who receive housing assistance. Both work plans, which would be tested on a pilot basis, would require recipients to be employed for at least 80 hours per month, or to be enrolled in job training programs. Those who do not meet work requirements would see part of their benefits cut…

(Editor’s note: Bold added for emphasis)

Food stamp work requirements for abled-bodied adults without dependents have existed in Wisconsin since April 2015.

As for it’s neighbor to the south, critics contend the food stamp program in Illinois is ripe for abuse. A work requirement does not exist for even abled-bodied adults without dependents. According to the Illinois Department of Human Services:

Illinois lost 4,500 jobs in November, followed by a whopping 16,700 jobs last month. From an Illinois Department of Employment Security news release Friday:

The Illinois Department of Employment Security (IDES) announced today that the unemployment rate in December inched up +0.1 percentage points to 5.7 percent and nonfarm payrolls decreased by -16,700 jobs over the month, based on preliminary data released by the U.S. Bureau of Labor Statistics (BLS) and IDES. November job growth was revised down to show a decrease of -4,500 jobs rather than the preliminary figure of +1,700 jobs. The downward revision, coupled with the drop in December payrolls kept job growth well below the national average, with Illinois -52,500 jobs short of its peak employment level reached in September 2000.

“Nonfarm payrolls reflect the job market and this kind of drop is troubling, to say the least,” said IDES Director Jeff Mays. “It’s the largest monthly decline we’ve seen this year and the drop was across most sectors.”

“Another month of climbing unemployment numbers that are far from the national average,” said Illinois Department of Commerce & Economic Opportunity Acting Director Sean McCarthy. “Illinois needs structural reforms and a balanced budget to attract new jobs and investment in our state. We cannot repair the damage of losing 11,000 manufacturing jobs, 9,700 construction jobs and 5,800 information and financial activities jobs over the course of just one year without real changes that create growth and opportunity in our economy.”

(Editor’s note: Bold added for emphasis)

To be fair, IDES added:

Over the year, nonfarm payroll employment increased by +28,400 jobs with the largest gains in two industry sectors: Professional and Business Services (+31,600); and Leisure and Hospitality (+11,900)…

Hmm. “Professional and Business Services,” which includes temporary staffing (booming after the bust). And “Leisure and Hospitality,” one of the lowest-wage sectors of the economy. Get where I’m going with this?

It’s been some time since a Survival And Prosperity post focused on inflation.

I suspect I’ll be blogging about it more in the coming months.

Jeffry Bartash wrote on MarketWatch this morning:

Inflation rose in 2016 at the fastest pace in five years, as rising rents and medical care and higher gas prices put a squeeze on consumers.

The consumer price index jumped 0.3% in December, the government said Wednesday…

A string of sharp gains since late summer helped drive up inflation by 2.1% for the full year, marking the biggest increase since a 3% gain in 2011…

(Editor’s note: Bold added for emphasis)

Bartash added:

For now it doesn’t look like inflation will wane soon. Gas prices rose again in January and many economists predict that aggressive stimulative measures by the new Trump administration could lead to even higher inflation…

(Editor’s note: Bold added for emphasis)

Jeffrey Sparshott added over on The Wall Street Journal website late this afternoon:

The latest figures- driven in part by an uptick in energy prices- suggest a four-year stretch of historically low inflation could be ending…

While details remain uncertain, the president-elect has pledge lower taxes and more infrastructure spending. That could lead to faster economic growth and accelerating inflation…

(Editor’s note: Bold added for emphasis)

As to what this might mean for interest rates, Fed Chair Janet Yellen spoke to the Commonwealth Club of California this afternoon. Ann Saphir reported on the Retuers website:

With the U.S. economy close to full employment and inflation headed toward the Federal Reserve’s 2 percent goal, it “makes sense” for the U.S. central bank to gradually lift interest rates, Fed Chair Janet Yellen said on Wednesday…

The Fed chief said that she and other Fed policymakers expected the central bank to lift its key benchmark short-term rate “a few times a year” through 2019, putting it near the long-term sustainable rate of 3 percent…